The central bank in Cyprus imposed a €100 a day withdrawal limit at cash
machines for all local banks on Sunday to avert a run on lenders, as the
island's leaders meet its international lenders for last-ditch talks to
avert a financial meltdown.

A sign informs depositors that they can withdraw a maximum of 260 Euros at an ATM of Laiki Bank. They can now only withdraw €100.Photo: Reuters

A spokesman for second largest lender Cyprus Popular Bank, which had previously limited withdrawals to €260, said the new measure began at 1pm local time and would remain in place until the bank reopens, which is scheduled for Tuesday, or until confirmation of continued emergency funding from the European Central Bank.

A government official, who declined to be named, told Reuters that the measure applied to all local banks on the island.

There were dramatic scenes on Thursday night as Cypriots queued to withdraw cash from the Laiki bank, the country’s second largest, after the European Central Bank warned it would cut off funds on Monday unless there was agreement on an international bailout.

Cypriots queue to take money out following the news that deposits will be taxed.

To prevent the bank’s collapse a cash limit of €260 a day was imposed as panic was fuelled by angry demonstrations by Laiki staff - the restructuring means 10,000 jobs are at risk - outside the Cypriot parliament.

This limit has now been cut further to €100 withdrawal a day across all local banks on the island.

Cypriot President Nicos Anastasiades and other ministers arrived in Brussels today for meetings with senior EU leaders, including Herman Van Rompuy, the European Council president, and Christine Lagarde, the IMF’s managing director for emergency talks over a deal under which deposits of more than 100,000 euros in the Bank of Cyprus will be hit by a 20 per cent levy.

Deposits of more than 100,000 euros in other banks will be targeted by a four per cent forced levy.

Cyprus’s leaders are expected to submit to the drastic plan - which critics call daylight robbery - in return for a €10bn (£8.5bn) bail-out loan to save the country from bankruptcy.

Demonstrator Gristakis Georgiou, an employee for Cyprus Popular Bank Pcl, center, reacts during a protest outside the parliament in Nicosia, Cyprus. (Bloomberg)

The eurozone and IMF are pushing Cyprus to hammer its largest bank as part of radical measures to raise up to €7bn as part of its bail-out deal or face going bust on Tuesday.

The country's second biggest bank, the Popular Bank, or Laiki in Greek, has already been forced to wind down under draconian bank resolution laws drawn up by the eurozone and agreed by Cypriot MPs on Friday.

The Bank of Cyprus must also absorb assets from Laiki and the eurozone is demanding that it take on the failed bank's ECB liquidity debts, which could add up to €9.1bn.

In total Cypriot bank assets total €68bn, with deposits of more than €100,000 totalling €38bn. The Bank of Cyprus has over a third of bank deposits.

The 20 per cent rate on high-value accounts at the Bank of Cyprus is likely to trigger political conflict on the island, which has seen widespread protests in the last week. It is expected to particularly hit Russian investors, who make up the bulk of the Cypriot financial sector's high-value clients.

Economic life in Cyprus has all but ground to a halt in the last few days, as the closure of the banks has turned the country into cash-only economy.

Town centres are all but deserted, and retailers, facing cash-on-delivery demands from suppliers, have warned that stocks are running low.